Wise up and prosper, BDO chief Chris Brant urges Australian business
It’s never been harder to do business in Australia. The regulatory environment – as good and as necessary as it is – isn’t making matters any easier.
You need look no further than the recent massive losses incurred by Australia’s two largest airlines – Qantas and Virgin Australia.
Just consider their cost base relative to other airlines and it is not hard to see why. Salaries and the price of finance are far higher here.
Irrespective of the fact that interest rates are relatively low in Australia, elsewhere around the globe they are far lower.
We all know how difficult the retail environment is. The rapid emergence of online businesses that can keep costs down is cruelling so many traditional, formerly lucrative concerns.
An example of that I came across recently was a UK-based children’s retail group, Mini Boden.
It now has an Australian web site and is offering products at less than the price it charges in the UK, because it sends its garments directly here from their point of manufacture, drastically reducing shipping charges.
The timeliness and refund policy of these internet-based businesses also trump many bricks and mortar retailers.
In many cases Australian retailers offer exchange only, whereas web sites are often backed by 100 percent guaranteed money back if customers are dissatisfied with their purchases.
Furthermore, my experience has been that any outlay has been credited to my account within four days of goods being returned.
World competition and the ability to transact globally has seen the speed of doing business improve significantly, aided by a better information flow and enhanced delivery process.
You can order something today and within a couple of days it is on your doorstep.
While our manufacturing sector is struggling with these changes, there are some countries, like the US, which are showing us up due to their lower cost environments.
America is becoming a focal point for manufacturing as it has transformed the way it does business.
The UK is another example, having reduced its corporate tax rate to 20 percent, whereas Australia’s is still 50 per cent higher.
Our loss appears to be their gain.
It’s not just products and product choice where customers stand to benefit from online platforms, but services too.
The latter is growing rapidly – everything from financial services and health insurance to utilities, telephony and IT services.
The standard of living in Australia is under threat, given the number of products and services that are being acquired offshore, rather than being developed and manufactured here.
But that is no reason for panic.
Overseas investors see us as a safe haven, a place where they can obtain a return significantly better than they can from their country of origin and, hence, they will continue to provide investment stimulus to Australia.
Offshore entities will drive significant business development in this country.
If products and services are too dear then, put simply, they won’t sell.
And that means some long established businesses will go to the wall or be acquired as a result.
When the quality of overseas imports is often as good as, and in some cases better than, locally produced products, and the value adds are greater, “Buy Australian” is unfortunately becoming a less relevant message.
A case in point is the local car manufacturing industry, which for so many years was hanging by a thread. Now it is dead and buried. Customers voted with their feet, or more to the point, with their wallets.
Accountancy practices, too, are significantly at risk under the traditional market model.
The cost of compliance work – as is demanded by government regulations – is becoming increasingly prohibitive, particularly when you have new institutions entering the fray, along with offshore players.
The answers aren’t rocket science, but they require willingness to change and change quickly.
You have to continually develop and move your business in line with global trends.
You have to invest in streamlining your business and ensure it is, and remains, relevant.
In our case, we have to invest in compliance-type processes, as the cost of doing this work adds no value to our clients. They don’t want to pay for it, but they will pay for value-added services.
Australia’s abundant natural resources are a fertile ground for innovation and money making abroad. This is where the agricultural sector comes into its own.
For example, our milk products are finding increasing penetration in the developing Asian community and there are enormous growth opportunities in this market for Australian business.
Talking about the Asian economy, it is a giant ready to take the next stride. Just reflect upon the fact that more than a third of the world’s population is virtually on our doorstep.
In China and India, the middle class is burgeoning at a rate of knots. Africa will be next cab off the rank. The market potential for expansion is enormous. So, stop thinking in an insular way and broaden your horizons.
It is imperative to take advantage of market intelligence. The more relevant and timely information you can access about the market you are operating in, the smarter you become.
Earlier this year, BDO and cloud-based software provider Retail Express launched the Australian Retail Index.
It gives retailers access to real time information about the state of the retail sector, so individual retailers can gauge their level of success against the rest of the industry and make adjustments if they are underperforming.
Such indices are excellent markers of success or failure.
Finally, strong strategic advisors will always have a place in reducing the risk of businesses falling off the precipice.
Unfortunately, all too often, such advice is called upon at the 11th hour or when it is too late.
The time to act is now. Innovate, Australian business … wise up and prosper, rather than stagnate or capitulate.
*Original Article by Chris Brant: http://www.brw.com.au/p/business/wise_business_and_prosper_bdo_chief_7m5tvJUxU6s0Rgc56IRW8L